Adverse selection is due to
A)hidden characteristics.
B)hidden actions.
C)symmetric information.
D)moral hazard.

Question

Quizplus · Accepted Answer

Adverse selection arises when there is asymmetric information about the hidden characteristics of the parties involved. For example, in insurance markets, individuals with greater risks are more likely to purchase insurance, leading to adverse selection. Hidden actions, moral hazard, and symmetric information are not directly related to adverse selection.

Adverse Selection Is Due to